CITY OF GREENUP FINANCIAL STATEMENTS AND SUPPLEMENT AL INFORMATION FOR THE YEAR ENDED JUNE 30, 2016 TOGETHER WITH INDEPENDENT AUDITOR'S REPORTS - 7

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1 L ' CTY OF GREENUP L ; FNANCAL STATEMENTS AND SUPPLEMENT AL NFORMATON FOR THE YEAR ENDED JUNE 30, 2016 TOGETHER WTH NDEPENDENT AUDTOR'S REPORTS - 7 l _J _J.. J

2 TABLE OF CONTENTS ***************** NDEPENDENT AUDTOR'S REPORT.... MANAGEMENT'S DSCUSSON AND ANALYSS.... PAGE BASC FNANCAL STATEMENTS: r, --" Government-wide Financial Statements - Statement ofnet Position.... Statement of Activities.... Fund Financial Statements - Balance Sheet- Governmental Funds.... Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position.... Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds.... Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities.... Statements of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund.... Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Special Revenue - Street Fund.... Statement of Net Position - Proprietary Funds.... Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds.... Statement of Cash Flows - Proprietary Funds.... Notes to Financial Statements _J -, ; NDEPENDENT AUDTOR'S REPORT ON NTERNAL CONTROL OVER FNANCAL REPORTNG AND ON COMPLANCE AND OTHER MATTERS BASED ON AN AUDT OF FNANCAL STATEMENTS PERFORMED N ACCORDANCE WTH GOVERNMENT AUDTNG STANDARDS SCHEDULE OF FNDNGS AND RESPONSES J **************** J j

3 r J ~ elley [g alloway ~ mith [Q] oolsby, PSC Certified Public Accountants and Advisors 1200 Corporate Court P. 0. Box 990 Ashland, Kentucky Phone (606) (606) Fax (606) (606) Web Member of A\\\\\\a\ G,o..,. r r D 0 0 n D 0 0 l L [, ) L The Honorable Lundie Meadows, Mayor Members of the City Council City of Greenup Greenup, Kentucky Report on the Financial Statements NDEPENDENT AUDTOR'S REPORT We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of the City of Greenup, Kentucky (the "City") as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. n making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions n our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities and each major fund of the City of Greenup, Kentucky as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the General Fund and the Street Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. L, Pikeville, KY Cold Spring, KY Cincinnati, OH L

4 r- 1.! r '; i J n j fl Other Matters Required Supplementary nformation Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis information on pages 4 through 9 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards n accordance with Government Auditing Standards, we have also issued our report dated August 29, 2018, on our consideration of the City of Greenup's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance.,< ~ 44/W7 ~,/7, 4,,,//;, //-t!.- Ashland, Kentucky August 29, 2018 r ',., -.) -

5 City of Greenup Management's Discussion and Analysis The management discussion and analysis (MD&A) gives readers an overview and analysis of the financial position and activities of the City of Greenup ("Government") for the fiscal year ended June 30, This information should be read in conjunction with the financial statements immediately following the analysis. Financial Highlights The assets of the Government exceeded its liabilities at the end of the fiscal year by $7,237,564 (net position). Governmental activities' unrestricted net position is $(49,242) and business type activities unrestricted net position is $201,122. The Government's total net position decreased by $11,783. Net position of governmental activities decreased by $5,094 and net position of business-type activities decreased by $6,689. At June 30, 2016, the governmental activities had $797,835 in total assets and $598,452 in total liabilities. Business type activities had $11,010,665 in total assets and $3,972,484 in total liabilities. Overview of Financial Statements r-,. ~ t This discussion and analysis serves as an introduction to the city's basic financial statements, which consist of three components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains other supplemental information in addition to the basic financial statements. Reporting the Government as a Whole This report is prepared under the standards for government financial reporting prescribed by the Governmental Accounting Standards Board, Statement Number 34 (GASB 34). This reporting format consists of a series of financial statements that provide an overview of all services provided by or supported by the Government (the Government-wide Statements) and provides more detailed information about major programs of the Government ("the fund statements"). These statements present a financial picture of the Government as a whole through the use of a consolidated statement of all funds and eliminating interfund transfers. The value of fixed assets of governmental type operations is presented as well. Government-wide financial statements include the Statement of Net Position and the Statement of Activities. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting system used by most private-sector business. All revenues earned and expenses incurred in the fiscal year are taken into account regardless of when cash is received or paid., } The Statement of Net Position presents information on all the Government's assets and liabilities as of June 30, The net position is the difference between assets and liabilities. Over time, an increase or decrease in net position is one indicator of whether the financial health is improving or deteriorating. nformation on other factors such as changes in the revenue structure and the condition of the Governments assets is also needed to assess the overall financial position of the Government. The Statement of Activities presents the Government's annual revenues and expenses, as well as any other transactions that increase or reduce net assets. Program revenues are offset by program expenses to provide better information as to program costs financed by general government revenues. The government-wide statements divide the Government's activities into two kinds of activities: - 4 -

6 Governmental activities - Most of the Government's basic services are reported here, including general (city) government, police, fire and street repair/improvement. Property taxes, insurance taxes and miscellaneous revenues finance most of these activities. Business-type activities - Activities primarily paid for from charges and fees to cover the cost of services are reported here. This includes water production, sanitary sewer services and solid waste management. Reporting the City's Most Significant Funds Fund financial statements report the Government's operations in more detail than the government-wide statements by providing information about the Government's most significant funds. Some funds are required to be established by local law or by bond covenants. However, many other funds are established to help control and manage money for a particular purpose. Two types of funds are presented in the fund financial statements: governmental funds and proprietary funds. Governmental funds - Most of the Government's basic services are reported in the government funds. These statements provide a short-term view of general government operations and how these services are financed as well as the balances left at year end that are available for future spending. These funds are reported using the modified accrual basis of accounting, which measures cash and all other financial assets that can be readily converted to cash. :' Proprietary funds - The Government charges fees for Business-type services which are intended to cover the cost of providing those services. The governing body decides that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. The subcategories of the funds include enterprise funds, which are business-type activities. The proprietary funds are reported in the same way that all activities are reported in the government-wide statements but the fund statements provide more detail. The City considers the Utility fund (water/sewer) to be its major proprietary fund. Analysis of the Government as a Whole i, ~ l\,_.,' Net Position As of June 30, 2016, the Government as a whole had a net position greater than its liabilities by $7,237,564. Net position of governmental activities is $199,383 and decreased by $5,094 over the prior year. Of these net assets $248,625 is invested in capital assets (net of related debt), and $(49,242) is unrestricted. The net position of the Government's business-type activities is $7,038,181 and decreased by $6,689 over i. the prior year. Of this net position $6,633,309 or 94% is invested in capital assets (net of related debt), U $203,750 is restricted and $201,122 is unrestricted. The largest portion of the City's net position (94%) reflects its investment in capital assets (i.e., land, buildings, machinery and equipment) less outstanding related debt used to acquire those assets. The city uses these capital assets to provide services to citizens and as a result, these assets are not available for future spending. The city's capital assets investment is reported net of related debt, but the resources needed to pay this debt must be provided from other sources since the capital assets cannot be used to liquidate the liabilities. Currently the government as a whole, total unrestricted net position is $151,880. No governmental activities unrestricted net position is available be used to meet the City's ongoing obligations to citizens and creditors. At the end of this fiscal year June 30, 2016 the City is able to report positive balances in all categories of total net assets, both for the government as a whole, as well as for its separate governmental and businesstype activities

7 r ' - r ~ i l, ~ r -, L j r, l _; r-, Analysis of the City's Net Position Governmental Activities 2016 Current and other assets $ 37,817 $ Capital assets Total assets Current liabilities 139,365 Long-term liabilities Total liabilities Net assets nvested in capital assets net of related debt 248,625 Restricted Unrestricted (49,242) Total net assets $ 199,383 $ Business-type Total Primary Activities Government (32,298) $ 887,431 $ 707,880 $ 925,248 $ 675, ,114,189 10,662,489 10,874,207 11,121, ,593 11,001,620 11,370,369 11,799,455 11,796,962 68, , , , , ,122,645 3,489,925 3,581,732 3,643, ,116 3,972,484 4,350,049 4,570,936 4,572, ,257 6,633,309 6,841,132 6,881,934 7,112, , , , ,832 (66,780} 201, ,880 33, ,477 $ 7,038,181 $ 7,044,870 $ 7,237,564 $ 7,249,347 '----,_} C.. l J i. c.. -i - 6 -

8 ~ Analysis of the City's Operations Governmental Business-type Total Primary Activities Activities Government Revenues Taxes $ 238,240 $ 204,781 $ $ $ 238,240 $ 204,781 Licenses and permits 204, , , ,286 Fees and fines 75,592 72,493 75,592 72,493 Rental income 45,710 45,500 45,710 45,500 Charges for services 34,287 35,001 2,925,458 2,815,984 2,959,745 2,850,985 Grant/other 1--; income ,308 Total $ $ 665,245 $ 22989,092 $ 2,816,108 $ 3,669,257 $ 3,481,353 1' l, Governmental Business-type Total Primary [7 Activities Activities Government Expenses C j, General government $ 189,061 $ 209,678 $ 189,061 $ 209,678 " j Police 276, , , ,702 -, Fire 181,497 82, ,497 82,995 Streets 32,585 32,705 32,585 32,705 J Capital outlay Debt services/ Depreciation J Total governmental activities $ 685,259 $ 593,937 $ 685,259 $ 593,937 Utility fund $ 22995)81 $ 3,038,541 2,995,781 3,038,541 _J Total primary government $ 3, $ 3, Change in net assets (5,094) 71,308 (6,689) (222,433) (11,783) (151,125) Net assets beginning of year, June 30, ,267, ,400,472 Net assets beginning of year, June 30, 2016 $ 199,383 $ 204,477 $ 7,038,181 $ 7,044,870 $ 7,237,564 $ 7,249,

9 Financial Analysis of the City's Funds A. The focus of the City's governmental funds is to provide information on near-term inflows or outflows and balances of spendable resources, which are useful in determining the City's financing requirements. Unreserved fund balance serves as a useful measure of the City's net resources available for spending at the end of the fiscal year. At the end of the fiscal year, the City governmental funds reported combined ending fund balances of $(125,830). The General fund has a negative fund balance of $(107,332) and a negative fund balance of $(18,498) in the Street fund. The General Fund at June 30, 2016 had revenues of$656,515 and capital lease proceeds of$360,000 with expenditures of $981,362 and a fund balance of$(107,332). The Municipal Aid Road Fund (Street Fund) at June 30, 2016 had revenues of $1 and expenditures of $40,286 and a fund balance of $(18,498). Proprietary Funds [',, ) The City's proprietary fund (Utility fund) or business-type activities had total assets of $11,039,936 and total liabilities of $4,010,800 leaving net assets of $7,038,181. The Utility fund had $2,925,458 in operating revenues, $63,303 in capital contributions and $331 in interest income. Operating expense totaled $2,879,805 and interest expense on debt service totaled $115,976. The utility fund total expenses exceeded its revenues by $(69,992). Budgetary Highlights The City adopted a balanced budget as required by Kentucky Revised Statues (KRS) for fiscal year The general fund revenues exceeded projections by $14,955 and operating expenditures came in under budget by $20,198. Asset and Debt Administration The City's investment in assets for governmental and business-type activities as of June 30, 2016 is $52,970 for non-depreciable assets and $10,821,237 for depreciable capital assets (net of accumulated depreciation). This investment in capital assets includes land, buildings and system improvements, machinery and equipment, park facilities, roads and construction in progress. CTY OF GREENUP-CAPTAL ASSETS \ Asset Land Construction n Progress Buildings and improvements Automotive equipment Operating equipment Office equipment nfrastructure Utility plant Governmental Business-type Activities Activities $ 36,000 $ 16, , ,014 1,021, ,633 1,347,742 25, ,741 17,685,229 1,669,455 19,497,236 Total 2016 $ 52, ,975 1,243,386 1,347,742 25, ,741 17,685,229 21,166,691 Less depreciation (909,437) (9,383,047) ( 0,292,484) Total $ $ 10) 14,189 $ 10,874,

10 r-- At the end of fiscal year 2016 the City had governmental activities debt of $514,402 compared to $189,663 at June 30, 2015, which represents an increase of $324,739. Business-type activities has debt,, of $3,489,925 compared to $3,845,907 at June 30, 2015, which represents a decrease of $355,982. The following chart summarizes governmental debt and business-type debt. Government Activities Debt General fund lease payable at 4.69% General fund lease payable at 3.90% General fund lease payable at 4.33% Compensated absences obligation Total Business-Type Activities Debt Revenue bonds Loans payable Total $ $ $ $ Amount 121,359 30, , ,402 Amount 2,926, ,258 3i489~925 ii ( j Description of Municipal Debt A lease for ladder truck. Balance at June 30, 2016 = $121,359. A lease for the purchase police car(s) at June 30, 2016 = $30,034. A lease for a fire truck. Balance at June 30, 2016 = $360,000 Utility revenue bonds payable for utility construction and maintenance. Various issues totaling $2,926,667 at June 30, See audit notes for additional detail. Bank and infrastructure loans for utility construction and maintenance. Loans total $563,258 at June 30, See audit notes for additional detail. Employee compensated absences payable after 60 days= $3,009. Economic Factors and Next Year's Budget \. J ~-. ) \ L, r - Unemployment rate for the City of Greenup for 2016 is 8.4 %. This rate is above the State of Kentucky rate at 5.2% and the national rate of 4.7%. nflationary trends in the City are consistent with the state and national trend. The following table summarizes the 2017 fiscal year budgeted expenses. General Fund - $634,825 Municipal Aid Program - $22,205 Utility Fund - $2,779,640 Total Budget - $3,436,670 Request for nformation This financial report is designed to provide a general overview of financial data for the City of Greenup. Requests for additional information should be addressed to: City of Greenup 1005 Walnut St Greenup, KY

11 r--- :~ l ' r, r, (.J r-1 i ),-,!,_.J,----.., '- J CTY OF GREENUP STATEMENT OF NET POSTON JUNE 30, 2016 Governmental Activities Assets: Cash and cash equivalents $ 50,469 Accounts receivable 82,401 Allowance for uncollectible accounts nternal balances, net (] 06,208) Other receivables 11,155 Restricted assets - Cash and cash equivalents Materials and supplies inventory Nondepreciable capital assets 36,000 Depreciable capital assets 1,633,455 Accumulated depreciation (909,437) Total assets 797,835 Deferred outflows of resources: Deferred savings from refunding bonds Total deferred outflows of resources Liabilities: Cash overdraft 18,824 Accounts payable 61,906 Other accrued liabilities 2,728 Customer deposits Accrued compensated absences, current 592 Current portion of long-term debt 55,315 Accrued compensated absences, non-current 3,009 Capital lease obligations, non-current 456,078 Notes payable, non-current Revenue bonds, non-current Business-Type Activities Total $ 208,484 $ 258, , ,371 (113,408) (] 13,408) 106,208 11, , ,750 65,427 65,427 16,970 52,970 19,480,266 21,113,721 (9,383,047) (] 0,292,484) 1,001,620 1,799,455 9,045 9,045 9,045 9,045 18, , ,902 29,725 32, , ,933 15,905 16, , ,595 3, , , ,145 2,602,500 2,602,500 r -1 Total liabilities 598,452 3,972,484 4,570,936 l..._j' l... _; Net Position: nvested in capital assets, net of related debt 248,625 Restricted Unrestricted (49,242) 6,633,309 6,881, , , , ,880 Total net position $ 199,383 $ 7,038,181 $ 7,237, _J The accompanying notes to financial statements are an integral part of this statement

12 ; r l_ l r --,, r --- '---- ', ,, ==--] r ""1 ' ' _) L,, '- J ('-~-~,----~ r ;, -,, J CTY OF GREENUP STATEMENT OF ACTVTES FOR THE YEAR ENDED JUNE 30, 2016 Functions/Programs Governmental Activities: General government $ Police department Street department Fire department nterest expense Total governmental activities Business-Type Activities: Utilities Total business-type activities Total primary government $ Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions 189,061 $ 34,287 $ $ 276,247 9,300 32,585 23, ,497 8,250 5, ,259 14,28] -- 41,200 _ 2,995,781 2,925,458 63,303 2,995,781 2,925,458 63,303 3,681,040 $ 2,959,745 $ 41,200 $ ~,30]_ Net (Expense) Revenue and _Char1ges in Net Position Governmental Business-Type Activities Activities Total $ (154,774) $ $ (154,774) (266,947) (266,947) (8,935) (8,935) (173,247) (173,247) (5,869) (5,869) (609,772) ( _09,ZJ2) (7,020) (7,020) (7,020) (7,020) $ _ (609,772) $ (7,020) $ (616,792) General Revenues: Property and other local taxes Franchise fees Rental income Occupational license fees nterest income Other income Total general revenues Change in net position Net position, June 30, 2015 Net position, June 30, 2016 $ 238,240 $ $ 238,240 75,592 75,592 45,710 45, , , ,803 40, , ,009 (5,094) (6,689) (11,783) 204,477 7,044,870 7,249,347 - $ 199,383 $ 7,038,181 $ 7,237,564 The accompanying notes to financial statements are an integral part of this statement

13 ,---, ' ( (: i ( ; (---, r--, t J \r l J C') L, ----: CTY OF GREENUP BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2016 Special Revenue Fund General Street Fund Assets Cash $ 27,109 $ 23,360 Garbage fees receivable 2,804 Other receivables 11, 55 Due from other funds 39,888 38,316 Total assets $ 80,956 $ 61,676 Liabilities and fund balances Liabilities: Cash overdraft $ 18,824 $ Accounts payable 21,620 40,286 Accrued wages Due to other funds 144,524 39,888 Accrued expenses 2,728 Accrued compensated absences 592 Total liabilities 188,288 80,174 Fund balances Unassigned (107,332) Assigned for special revenue funds (18,498) Total fund balances (107,332) (18,498) Total liabilities and fund balances $ 80,956 $ 61,676 Total Governmental Funds $ 50,469 2,804 11,155 78,204 $ 142,632 $ 18,824 61, ,412 2, ,462 (107,332) (18,498) (125,830) $ 142,632 ~--J The accompanying notes to financial statements are an integral part of this statement

14 CTY OF GREENUP RECONCLATON OF THE BALANCE SHEET- GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSTON JUNE 30, 2016 r- i ( \l r, [ \;. \ _) r,,----, Total fund balances - Governmental Funds Amounts reported for governmental activities in the statement of net position are different because: Capital assets of $1,669,455 net of accumulated depreciation of $909,437 used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Municipal Road Aid funds were not collected within current period and therefore are not reported in the governmental funds. Long-term liabilities are not due and payable in the current period and therefore are not reported in the governmental funds. Capital lease obligation (511,393) $ (125,830) 760,018 79,597 L.)., Accrued compensated absences (3,009) Net position - Governmental Activities (514,402) $ 199,383 ~ --,,) \._).) The accompanying notes to financial statements are an integral part of this statement

15 r- :' CTY OF GREENUP STATEMENT OF REVENUES, EXPENDTURES AND CHANGES N FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, , Total Special Revenue Fund Governmental General Street Fund Funds Revenues Property taxes $ 73,419 $ $ 73,419 r-, Vehicle taxes 17,400 17,400 i Occupational license fees 194, ,483 l Business license fees 9,720 9,720 r Franchise taxes 75,592 75,592 i nsurance taxes 147, ,421 ' Garbage fees 34,287 34,287 r---: ntergovernmental revenues 17,551 17,551 l J nterest Rent 45,710 45,710 r-, Other income 40,803 40,803 l ; r 1 l! Total revenues 656, ,516 Expenditures,.---: General government 190, ,808 l_j Police department 257, ,677 Street department 40,286 40,286 c, Fire department 490, ,767 Debt service: C _) Principal retirement 36,241 36,241 nterest 5,869 5,869 C _J Total expenditures 981,362 40,286 1,021,648 Excess (deficiency) ofrevenues over (under) expenditures (324,847) (40,285) (365,132) Other financing sources (uses) Capital lease proceeds 360, ,000 Transfers in Transfers out ~-) Total other financing sources (uses) 360, ,000 Net change in fund balance 35,153 (40,285) (5,132) Fund balances, beginning of year (142,485) 21,787 (120,698), Fund balances, end of year $ (107,332) $ (18,498) $ (125,830) The accompanying notes to financial statements are --- an integral part of this statement

16 CTY OF GREENUP RECONCLATON OF THE STATEMENT OF REVENUES, EXPENDTURES, AND CHANGES N FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTVTES FOR THE YEAR ENDED JUNE 30, 2016 Net change in fund balances - Governmental Funds $ (5,132) r-..., l r~, ' ( ) r -, l ) r-1 L ) r~, l J 1' r ' L,> Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of these assets are allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation expense in the current period. Capital outlay 408,748 Depreciation (107,621) Excess of capital outlays over depreciation expense The issuance of long-term debt provides current financial resources to governmental funds, while repayment of the principal and interest consumes current financial resources of governmental funds. This amount is the net effect of these differences in the treatment of longterm debt and related items. Municipal Road Aid funds were not collected within the current period and therefore are not reported in governmental funds in the current period. However, these funds were recorded in the statement of activities. Generally, expenditures recognized in the fund financial statements are limited to only those that use current financial resources, but expenses are recognized in the statement of activities when they are incurred for the following: 301,127 (323,759) 23,650 ~-J Long-term portion of accrued compensated absences (980)... ) Change in net position of Governmental Activities $ (5,094) The accompanying notes to financial statements are an integral part of this statement

17 ,-~ CTY OF GREENUP STATEMENT OF REVENUES, EXPENDTURES AND CHANGES N FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED JUNE 30, ' l r--, r,,,!' l J r-7 l " r7 J Revised Budget Budget Revenues Property and other local taxes $ 305,400 $ 305,400 $ ntergovernmental revenues 17,550 17,550 Charges for service 34,350 34,350 Rental income 45,000 45,000 Licenses and permits 195, ,250 Other income 44,010 44, , ,560 Expenditures General government 262, ,781 Police 227, ,149 Fire 107, ,150 Debt service 44,480 44, ,560 1,001,560 Actual 313,832 17,551 34,287 45, ,203 40, , , , ,767 42, ,362 Variance Favorable (Unfavorable) $ 8,432 1 (63) 710 8,953 (3,078) 14,955 71,973 (30,528) (23,617) 2,370 20,198, J ' -, Excess (deficiency) ofrevenues over (under) expenditures (360,000) (324,847) 35,153 s.,) Other Financing Sources (Uses) Capital lease proceeds 360, ,000 L_) Total other financing sources (uses) 360, ,000 ) Net change in fund balance 35,153 35,153 Fund balance, beginning of year (142,485) (142,485) (142,485) j Fund balance, end of year $ (142,485) $ (142,485) $ (107,332) $ 35,153 The accompanying notes to financial statements are an integral part of this statement

18 1-- r-, 1-~1 l Revenues ntergovernmental revenues Other income Total revenues CTY OF GREENUP STATEMENT OF REVENUES, EXPENDTURES AND CHANGES N FUND BALANCE - BUDGET AND ACTUAL STREET FUND FOR THE YEAR ENDED JUNE 30, 2016 Original Budget Revised Budget $ 27,150 $ 27,150 $ ,165 27,165 Actual Variance Favorable (Unfavorable) $ (27,150) (14) (27,164) 1-, l, Expenditures Street department Total expenditures 81,465 81,465 81,465 81,465 40,286 40,286 41,179 41,179 r-, l, - j 1--1 l _ Excess of revenues over (under) expenditures Net change in fund balance Fund balance, beginning of year (54,300) (54,300) (54,300) (54,300) 54,300 54,300 (40,285) (40,285) 21,787 14,015 14,015 (32,513) 1--,,_) Fund balance, end of year $ $ $ (18,498) $ (18,498) r ' j, l J c J.. : The accompanying notes to financial statements are an integral part of this statement

19 ,, CTY OF GREENUP STATEMENT OF NET POSTON PROPRETARY FUNDS JUNE 30, 2016 i n ASSETS Current Assets: Cash and cash equivalents Accounts receivable Allowance for doubtful accounts Due from other funds Materials and supplies inventory Total current assets Restricted Assets: Cash and cash equivalents Total restricted assets Capital Assets: Property, plant and equipment Less: Accumulated depreciation Total capital assets - net Total assets Utility Fund $ 208, ,970 ( 13,408) 144,524 65, , , ,750 19,497,236 (9,383,047) O, 14,189 11,039,936 DEFERRED OUTFLOWS OF RESOURCES Deferred savings from refunding bonds Total assets and deferred outflows ofresources 9,045 J,048,981 r, i L_j r, L_j r ' i r L.s LABLTES Current liabilities (payable from current assets): Accounts payable Due to other funds Accrued expenses Accrued compensated absences Accrued interest payable Customer deposits Current portion of bonds payable Current portion of notes payable Total current liabilities Long-term liabilities: Revenue bonds payable Notes payable Total long-term liabilities Total liabilities NET POSTON: nvested in capital assets, net of related debt Restricted for debt payment and capital outlay Unrestricted Total net position 105,996 38,316 20,445 15,905 9, , ,167 43, ,155 2,602, ,145 3,122,645 4,010,800 6,633, , ,122 $ 7,038,181 The accompanying notes to financial statements are an integral part of this statement

20 CTY OF GREENUP STATEMENT OF REVENUES, EXPENSES AND CHANGES N NET POSTON PROPRETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016,- l r-: l, t~ r-~ r r l _,,, l,,r--'\ LJ ' '! L1 r ' LJ r, OPERATNG REVENUES: Water sales Sewer service Miscellaneous Total operating revenues OPERA TNG EXPENSES: Salaries, wages and related expenses Health insurance Contractual services Materials and supplies Repairs and maintenance Fuel and oil Utilities nsurance Office supplies Rent Depreciation Sewer treatment costs Miscellaneous Total operating expenses OPERA TNG NCOME NON-OPERA TNG REVENUES (EXPENSES): nterest income nterest expense Total non-operating revenues (expenses) LOSS BEFORE CAPTAL CONTRBUTONS CAPTAL CONTRBUTONS DECREASE N NET POSTON NET POSTON, JUNE 30, 2015 Utility Fund $ 2,664, ,515 65,513 2,925, , , , , ,515 34, ,006 43,596 52,204 45, ,398 51,013 70,967 2,879,805 45, (115,976) (115,645) (69,992) 63,303 (6,689) 7,044,870 ~-" NET POSTON, JUNE 30, 2016 $ 7,038,i8i r ~J L_,, The accomanying notes to financial statements are an integral part of this statement

21 CTY OF GREENUP ST A TEMENT OF CASH FLOWS PROPRETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2016,--. 1' r t J!7 l, r~ ~ J f7 l ; CASH FLOWS FROM OPERA TNG ACTVTES: Cash received from customers Cash payments to suppliers for goods and services Cash payments to employees Other operating revenues Net cash provided by operating activities CASH FLOWS FROM CAPTAL AND RELATED FNANCNG ACTVTES: Acquisition and construction of capital assets Principal paid on long-term debt nterest paid on long-term debt Capital contribrutions Net cash used for capital and related financing activities CASH FLOWS FROM NVESTNG ACTVTES nterest income Net cash provided by investing activities NET NCREASE N CASH AND CASH EQUVALENTS Utility Fund $ 2,913,462 (1,595,873) (703,564) 65, ,538 (46,098) (355,982) ( 00,471) 63,303 (439,248) ,621 CASH AND CASH EQUVALENTS, June 30, ,613 r l ' ' l_' l-: L' L_J ( \ L., L CASH AND CASH EQUVALENTS, June 30, 2016 RECONCLATON OF OPERA TNG NCOME TO NET CASH PROVDED BY OPERA TNG ACTVTES Operating income Adjustments: Depreciation Changes in assets and liabilities: ncrease in accounts receivable Decrease in inventories Decrease in accounts payable Decrease in accrued wages ncrease in accrued compensated absences ncrease in due from other funds ncrease in due to other funds ncrease in other accrued liabilities ncrease in customer deposits Net cash provided by operating activities $ 412,234 $ 45, ,398 7,753 18,657 (66,703) (6,913) 7,974 24,660 8,295 35,764 $ 679,538 The accompanying notes to financial statements are an integral pa1i of this statement

22 CTY OF GREENUP NOTES TO FNANCAL STATEMENTS JUNE 30, 2016 (1) SUMMARY OF SGNFCANT ACCOUNTNG POLCES n. The City of Greenup, Kentucky ("the City") was incorporated in the year of 1818 and operates under a Mayor-Council form of government and provides the following services: public safety (police and fire), street maintenance, water, solid waste management, wastewater treatment, recreation, public improvements and general administrative services. \'._ j The accounting policies of the City of Greenup, Kentucky conform to generally accepted accounting principles (GAAP), as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the more significant policies: Reporting Entity n r, l J r: \,._ j n evaluating how to define the City, for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in GAAP. The basic--but not the only--criterion for including a potential component unit within the reporting entity is the governing body's ability to exercise oversight responsibility including, but not limited to, the selection of governing authority, the designation of management, the ability to significantly influence operations and accountability for fiscal matters. The other criterion used to evaluate potential component units for inclusion or exclusion from the reporting entity is the existence of special financing relationships, regardless of whether the City is able to exercise oversight responsibilities. Based upon these criteria, the City has no component units to be reported in these financial statements. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the City. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. r i ' '-----' i l_, The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. The City considers all governmental and proprietary funds to be major funds, due to their belief that all of these funds present financial information which is important to the financial statement users. Thus, individual governmental funds and individual proprietary funds are reported as separate columns in the fund financial statements

23 i' 1., r, l, [. LJ ( ' i. l.j Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary funds financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, grants, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The City reports the following major Governmental Funds: General Fund - The General Fund is the general operating fund of the City. t is used to account for all financial resources except those required to be accounted for in another fund. Special Revenue Fund - The Special Revenue Fund is used to account for the proceeds of specific revenue sources ( other than expendable trusts or major capital projects) that are legally restricted to expenditures for specified purposes. The City's only special revenue fund is the Street Fund. The City reports the following Proprietary Fund: Utility Fund - The Utility Fund is used to account for water and wastewater (sewer) services for the City and surrounding communities. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the City Utility Fund and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenue of the City's Enterprise Funds, are charges to customers for sales and services. The City also recognizes as operating revenue tap fees intended to recover the costs of connecting new customers to the utility system. Operating expenses for Enterprise Funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Budgeting The City follows the procedures established by the Department for Local Government pursuant to Section 91A.050 of the Kentucky Revised Statutes in establishing budgetary data

24 {. j 1., '.,. l r L ; L j Cash and Cash Equivalents For purposes of the statement of cash flows, cash includes amounts held in checking accounts and certificates of deposit (including those held as restricted assets). Property Tax Property taxes are generally levied on November 30 of each year based upon the assessed value as of February 1. The lien date for assessed taxes is March 1 of each fiscal year. Taxes are payable on or before March 1 of the following year. All unpaid taxes become delinquent after that date. An allowance is established for delinquent taxes to the extent that their collectibility is improbable. The assessed value of property upon which the levy for the 2016 fiscal year was based was $40,843,048. The tax rate assessed for the year ended June 30, 2016 to finance general fund operations was $.1487 per $100 of valuation on real and tangible property. The City has enacted an ordinance providing for eight percent tax on all insurance premiums covering property within the City limits. The tax is paid to the Kentucky Department of nsurance who in tum forwards the tax collections to the City. nventories nventories are valued at cost (first-in, first-out method). nventory in the Utility Fund consist of chemicals, repair parts, and other supplies. Capital Assets and Depreciation General capital assets are those assets not specifically related to activities reported in the proprietary funds. These assets generally result from expenditures in the governmental funds. These assets are reported in the governmental activities column of the government-wide statement of net position but are not reported in the fund financial statements. Capital assets utilized by the proprietary funds are reported both in the business-type activities column of the government-wide statement of net position and in the respective funds. All capital assets are capitalized at cost ( or estimated historical cost) and updated for additions and retirements during the year. Donated fixed assets are recorded at their fair market values as of the date received. The City maintains a capitalization threshold of five thousand dollars. mprovements are capitalized; the cost of normal maintenance and repairs that do not add to the value of the asset or materially extend an assets life are not. All reported capital assets are depreciated with the exception of land and construction m progress. ~J The City provides for depreciation and obsolescence of such assets by annual charges to expense. These charges are calculated to depreciate, on a straight-line basis, the gross carrying amounts of depreciable assets over the following expected useful lives: Buildings and improvements nfrastructure Vehicles and equipment Office equipment Other equipment Sewer system Water system 7-40 years 10 years 3-10 years 5 years 5-10 years 5-40 years 5-40 years The City has elected not to report major general infrastructure assets retroactively; and therefore, infrastructure assets constructed prior to July 1, 2003 are not included in the City's financial statements

25 nterfund Transactions During the course of normal operations, the City has numerous transactions between funds including expenditures and transfers of resources to provide services, construct assets, and service debt. The accompanying financial statements generally reflect any such transactions as transfers. nterfund Receivables and Payable Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Compensated Absences The City's accrued liabilities for future compensated absences are recorded to the extent the future leave (1) relates to rights attributable to employee services already rendered, (2) relates to rights that vest or accumulate, (3) where payment is probable, and (4) where amounts can be reasonably estimated. Amounts that normally would be paid with expendable available financial resources are recorded in the Governmental Fund Financial Statements. Amounts paid or payable within 60 days are deemed to be payable from expendable available resources. Liabilities for compensated absences are recorded in full in the Government-wide and Proprietary Fund financial statements. Fund Balances, L J L_J ~- ) i l _;! ' L--' The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: Nonspendable fund balance-amounts that are not in a spendable form (such as inventory) or are required to be maintained intact; Restricted fund balance-amounts constrained to specific purposes by their providers (such as grantors, bondholders and higher levels of government), through constitutional provisions, or by enabling legislation; Committed fund balance-amounts constrained to specific purposes by the City itself, using its decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the City takes the action to remove or change the constraint; Assigned fund balance-amounts the City intends to use for a specific purpose (such as encumbrances); intent can be expressed by the City Council or by an official or body to which the City delegates the authority; Unassigned fund balance-amounts that are available for any purpose; unassigned amounts are reported only in the General Fund. When committed, assigned and unassigned resources are available for use, it is the City's policy to use committed and assigned resources first, then unassigned resources as they are needed. Net Position,_.J Net position represents the difference between assets and liabilities. Net position invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of governments. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect